Airbus says orders for A380 may slow

Attacks not likely to upset sales in long term, maker says

By

BillClifford

TOKYO (CBS.MW) -- Airbus said Wednesday that orders for its A380 superjumbo jet, which will carry up to 550 passengers, could slow as a result of last week's hijack-suicide attacks, but the European aircraft manufacturer is confident of long-term demand.

"Of course, the attacks could have an affect (on orders) in the short-term," said David Velupillai, an Airbus spokesman. "But for the medium and long term, we're cautiously optimistic."

The grounds for that optimism, he said in a telephone interview from France, are industry projections that air traffic demand will double from today's levels in 15 years and triple in 23 years.

Ever-larger aircraft needed

Fuelled by growing international trade and tourism, the projected increase in demand "is the driving force behind the need to move to larger aircraft," Velupillai said.

The Airbus A380 will be the biggest commercial airplane ever built, a double-decker carrying 550 passengers, compared with 413 passengers in the largest 747 today.

Traffic demand, Velupillai said, "is a challenge for the whole industry, not just the manufacturers but air-traffic controllers, airlines, airports the providers of transportation infrastructure."

But now that challenge is being reshaped in the face of tragedy. The Airbus spokesman acknowledged that airlines are reeling from reduced travel and that orders for planes could decline in the wake of the terror attacks in which planes were hijacked and deliberately crashed into New York World Trade Center towers and the Pentagon, killing and injuring more than 5,000 people.

Indeed, Boeing
BA, +0.39%
Airbus' U.S. rival, said late Tuesday it will lay off up to 30,000 workers, or nearly a third of its commercial aviation unit, as a result of disruptions caused by U.S. terrorist attacks. See story.

In Washington, airline industry executives were meeting with administration officials and congressional leaders on a financial assistance package that could be worth some $24 billion. See story.

Velupillai predicted that recovery would come, noting that travel and orders bounced back within a year of the Persian Gulf War a decade ago. He said Airbus has received no cancellations for the 67 orders it has received thus far for A380 superjumbo passenger and cargo aircraft. See separate analysis of risks to Airbus.

After almost a decade of planning and some delays, the Airbus board officially approved the A380 project in December. Commitments to buy the superjumbo craft have come from United Arab Emirates, Air France, Singapore Airlines, Virgin, Qantas and Fedex, among others. Airbus needs about 180 more orders just to break even.

Big plane, big queues

Airbus plans to deliver the first A380 passenger jets in 2006 and it will roll out the cargo version in 2008. By 2019, the company expects to have 1,550 A380s on the market. At $383 billion, it's the largest segment of the aircraft manufacturing market in dollar terms and also the most profitable, said Velupillai.

But even before the tragedies last week, frustrated aircraft passengers complained of myriad frustrations from booking to boarding flights. Certainly now security procedures will be tightened. Will they have the patience and feel safe enough to travel aboard a flying hotel for 550?

Airbus said there's no getting around the economics of larger aircraft. "It's the future," said Velupillai, adding that the Asia-Pacific will be a large part of the market Airbus hopes to serve, because of the long distances that separate densely populated areas in the region.

As for security, "the best defense has to be stopping terrorists and bombs from getting aboard aircraft in the first place."

There are safety hurdles, also, that all plane manufacturers have to satisfy. Among them, planes must be built so that every passenger is able to evacuate in 90 seconds despite half of the aircraft's doors being closed. Velupillai said that trials are under way with escape-slide manufacturers, and Airbus is confident the A380 will meet those requirements.

The European Aeronautic Defence & Space Co. (EADS) (005730)(938914), an 80 percent shareholder in Airbus, fell in early trading but rebounded to end up 0.8 percent at €11.14.

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